Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/195776
Authors: 
Lanz, Rainer
Lee, Woori
Stolzenburg, Victor
Year of Publication: 
2019
Series/Report no.: 
WTO Staff Working Paper No. ERSD-2019-03
Abstract: 
This paper brings together three strands of literature on the determinants of international trade − distance, formal, and informal institutions − to explain differences in export performance across countries. Using an augmented gravity model, we find that the importance of formal institutions (rule of law) for bilateral trade increases with distance. Similarly, the pro-trade effect of informal institutions (migrant networks) is larger for distant countries. After confirming that informal institutions can substitute for weak formal institutions in promoting trade, we finally show that this substitution effect does not decrease with distance. Our findings contribute to explaining the persistent negative effect of distance on the export performance of many developing countries despite reductions in trade costs, and provide guidance to policy makers in terms of trade reform, regional trade liberalization and export promotions strategies.
Subjects: 
International trade
Distance
Rule of law
Migrant networks
JEL: 
D23
F14
F22
L14
O43
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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